Covid-19 class actions: The tidal wave on the horizon

Opinion: As the dust begins to settle from Covid-19, now, more than ever before, individuals and businesses will collectively begin to survey their losses and look for ways to recover, writes Nikki Chamberlain.

The unprecedented restrictions placed by the government on our freedom of movement and freedom to engage in commercial activities means that employing legal recourse will not simply be a matter of playing the legal blame game but, rather, a matter of survival for many individual and corporate economic interests.

If overseas developments foreshadow developments here, then the vehicle used to remedy many of these losses will be the use of class action proceedings and litigation funders. Why? Class actions provide a mechanism to vindicate mass wrongs simultaneously.

If overseas developments foreshadow developments here, then the vehicle used to remedy many of these losses will be the use of class action proceedings and litigation funders. Why? Class actions provide a mechanism to vindicate mass wrongs simultaneously. Litigation funders, arguably, make the use of class actions economically viable. In fact, there are already reports of class actions forming against various stakeholders in the cruise-line industry. It is only a matter of time before more industries are swept up in class action litigation relating to Covid-19 in New Zealand.

Turning first to the cruise-line industry, the filing of Australia’s first Covid-19 class action is imminent. The class action concerns Carnival Cruises' "Ruby Princess" ship that docked in Australia and New Zealand in mid-March. Shine Lawyers in Australia claims that 2,700 passengers on board the Ruby Princess were not advised of the risks of Covid-19. The passengers were then allowed to disembark in New South Wales on 19 March. This disembarkment allegedly accounts for approximately 620 cases of Covid-19 in Australia and multiple deaths. The Police Commissioner in New South Wales has launched a criminal investigation into who is to blame for allowing infected passengers to disembark in Australia.

Closer to home, the Ruby Princess’ passengers were also allowed to disembark in Napier, New Zealand on 15 March. The Ministry of Health has confirmed that approximately 19 cases of Covid-19 in Napier are linked to the Ruby Princess. In addition, cases linked to the Ruby Princess account for one of the ten Covid-19 clusters in New Zealand. Against this background, a class action may form against Carnival Cruises for allowing unwell passengers to disembark in Napier. In this respect, an action, say in negligence, for compensatory damages would not be barred in New Zealand by the Accident Compensation Act 2001 because the virus is not a "personal injury" covered by the Act (see s 26(2)). Of course, the strength of any class action would be reliant on the evidence available to prove that Carnival Cruises has breached a duty of care and caused the resultant loss.

Outside of the cruise-line industry, the reach of class action litigation is likely to be far wider than first expected. In the United States, numerous class actions have been filed which can be categorised as shareholder, consumer or employment class actions.

Outside of the cruise-line industry, the reach of class action litigation is likely to be far wider than first expected. In the United States, numerous class actions have been filed which can be categorised as shareholder, consumer or employment class actions. The shareholder class actions generally allege that the risks of Covid-19 were misrepresented to the shareholders by the relevant company. For example, a federal securities class action was commenced in the United States by shareholders who purchased securities in Norwegian Cruise Lines. The shareholders alleges that Norwegian Cruise Lines violated its Code of Ethical Business Conduct in respect to SEC filings and press releases noting a positive outlook in spite of Covid-19 (see Douglas v Norwegian Cruise Lines). The consumer class actions filed in the United States predominantly relate to consumers inability to obtain a refund or use services provided by companies after government restrictions were put in place. The employment class actions generally relate to redundancies, payment disputes and failing to provide protective gear to employees interacting with the public. Interestingly, there has also been two cases filed in the United States against the People's Republic of China in relation to its response to Covid-19.

These trends are likely to be reflected in New Zealand. We are likely to see other class actions arise in the shareholder, consumer and employment fields. From a legal standpoint, market volatility means that directors of companies will be under increased pressure with their disclosure obligations to shareholders. Consumers will want to closely examine their contracts with companies who continue to charge them through the lockdown period although their services are unavailable. Unions are likely to be highly activated and engaged in dealing with employment matters. And, of course, the government's actions are likely to be monitored as to how it is handling the Covid-19 crisis.

Clearly the government's actions due to Covid-19 has significantly impacted the private sector. Already noises are being made about what is and is not classified as an “essential service”.

Leaving aside the legal merits of any claim, whether any action should be commenced from an ethical standpoint is another question altogether.

However, as a general comment, leaving aside the legal merits of any claim, whether any action should be commenced from an ethical standpoint is another question altogether. There are likely to be polarising ethical views in relation to any litigation (class action or otherwise) commenced due to Covid-19 given the unusual and unprecedented situation it has brought about nationally and internationally. The balance to be struck between managing health harms and business harms is complex - and, in my opinion, one that is likely to be met with sympathetic views from the judiciary outside of flagrant wrongdoing or grossly negligent conduct.

Nikki Chamberlain is a Lecturer in the Faculty of Law at the University of Auckland. Her research specialities include complex litigation and mass tort litigation.

This article reflects the opinion of the author and not necessarily the views of the University of Auckland.